Wellington

πŸ’°

Tax and IRD

Information about tax obligations, obtaining an IRD number, and understanding the New Zealand tax system.

Sections

1. Overview of Taxes in New Zealand

In New Zealand, taxes are managed by the Inland Revenue Department (IRD), which is the government agency responsible for collecting taxes, administering social support programs, and ensuring compliance with tax laws. Wellington, as the capital city, follows the same tax regulations as the rest of the country.

Key Tax Types in New Zealand

  • Income Tax: Paid by individuals and businesses on their earnings.
  • Goods and Services Tax (GST): A 15% tax on most goods and services.
  • Pay-As-You-Earn (PAYE): A system where employers deduct income tax from employees' wages.
  • Resident Withholding Tax (RWT): Tax on interest earned from bank accounts or investments.
  • Provisional Tax: Paid by self-employed individuals or businesses with irregular income.
  • Fringe Benefit Tax (FBT): Paid by employers on non-cash benefits provided to employees.
  • Property Taxes: Includes rates paid to local councils (e.g., Wellington City Council) and potential taxes on property sales (Bright-line Test).

2. Tax Rates in New Zealand

Income Tax Rates for Individuals (2023-2024)

  • Up to NZD 14,000: 10.5%
  • NZD 14,001 to NZD 48,000: 17.5%
  • NZD 48,001 to NZD 70,000: 30%
  • NZD 70,001 to NZD 180,000: 33%
  • Over NZD 180,000: 39%

Corporate Tax Rate

  • 28% for businesses.

Goods and Services Tax (GST)

  • 15% on most goods and services. Some items, like financial services and residential rent, are exempt.

Resident Withholding Tax (RWT)

  • Rates vary depending on your income and whether you provide your IRD number to your bank. Common rates are 10.5%, 17.5%, 30%, or 33%.

3. Registering with the IRD

To comply with New Zealand’s tax laws, you must register with the IRD and obtain an IRD number. This number is essential for paying taxes, receiving income, and accessing government services.

How to Get an IRD Number

An IRD number is required for:

  • Starting a job.
  • Opening a bank account.
  • Receiving government benefits.
  • Filing tax returns.
Steps to Apply for an IRD Number

  1. Determine Your Residency Status:

    • If you are a resident or citizen, you can apply directly.
    • If you are a non-resident or new immigrant, you may need additional documentation.

  2. Gather Required Documents:

    • For Residents/Citizens:
      • Passport or birth certificate.
      • Proof of address (e.g., utility bill, bank statement).
    • For Non-Residents/Immigrants:
      • Passport.
      • Visa or work permit.
      • Proof of address.
      • IR742 form (if applicable).

  3. Submit Your Application:

    • Apply online via the IRD website.
    • Alternatively, you can apply in person at a New Zealand PostShop or send your application by mail.

  4. Processing Time:

    • Typically takes 10 working days.
Cost:
  • There is no fee to apply for an IRD number.

4. Filing Taxes in New Zealand

Tax Year

  • The tax year in New Zealand runs from 1 April to 31 March.

Filing Requirements

  • Employees: Most employees do not need to file a tax return because taxes are deducted automatically through the PAYE system. However, you may file a return if you have additional income or want to claim tax credits.
  • Self-Employed/Businesses: Must file an Individual Tax Return (IR3) or a Company Tax Return (IR4).

Important Deadlines

  • 31 March: End of the tax year.
  • 7 July: Deadline for filing individual tax returns (if required).
  • 28 August: Provisional tax payments due (if applicable).

How to File Taxes

  1. Log in to your myIR account on the IRD website.
  2. Complete the relevant tax return form (e.g., IR3 for individuals, IR4 for companies).
  3. Submit your return online or by mail.

5. Costs Involved

  • IRD Number Application: Free.
  • Tax Filing: Free if you file yourself. If you hire an accountant or tax agent, fees typically range from NZD 200 to NZD 1,000, depending on the complexity of your tax situation.

6. Local Tips for Managing Taxes in Wellington

  1. Set Up a myIR Account:

    • This is the IRD’s online portal where you can manage your taxes, check your tax status, and file returns. It’s user-friendly and essential for staying on top of your obligations.

  2. Understand Tax Credits:

    • You may be eligible for tax credits, such as the Independent Earner Tax Credit (IETC) if you earn between NZD 24,000 and NZD 48,000.

  3. Keep Records:

    • Maintain records of your income, expenses, and receipts for at least seven years. This is especially important for self-employed individuals and businesses.

  4. Use Tax Agents:

    • If your tax situation is complex, consider hiring a tax agent or accountant in Wellington. They can help you maximize deductions and ensure compliance.

  5. GST Registration:

    • If your business earns over NZD 60,000 per year, you must register for GST. You can do this through your myIR account.

  6. Bright-line Test for Property Sales:

    • If you sell a residential property within 10 years of purchase (5 years for properties bought before 27 March 2021), you may need to pay tax on the profit. This does not apply to your primary residence.

  7. Check for Overpayments:

    • At the end of the tax year, the IRD may automatically assess whether you’ve overpaid or underpaid taxes. If you’ve overpaid, you’ll receive a refund.

  8. Local Support:

    • Wellington has several community organizations and workshops that provide free or low-cost tax advice, especially for new immigrants and small business owners.

7. Additional Resources

  • IRD Website: www.ird.govt.nz
  • Wellington City Council: For property rates and local taxes.
  • Citizens Advice Bureau (CAB): Offers free advice on tax and financial matters.
  • Tax Agents and Accountants in Wellington:
    • Deloitte Wellington.
    • KPMG Wellington.
    • Local independent accountants.

By following this guide, you’ll be well-prepared to manage your taxes in Wellington, New Zealand. If you have specific questions or need further assistance, feel free to ask!